The countdown to the Reserve Bank of New Zealand interest rate meeting begins, which will meet on February 22 next week to decide where to set the official cash rate, OCR.
Contrary to the belief in the markets that the RBNZ needs to keep raising rates at a rapid pace, KiwiBank says the RBNZ should pause its rate hikes, citing a national state of emergency over Cyclone Gabrielle. New Zealand Prime Minister Chris Hipkins was scheduled to travel to Gisborne on Thursday to meet with residents and first responders on the ground.
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The RBNZ should pause next week as we deal with the devastating impact of Cyclone Gabrielle. The RBNZ can come back in April and resume tightening if necessary.
Rumors of a 50 basis point, or even 75 basis point, hike should be put to rest. The communication effort to explain such a measure in the midst of a crisis would be, to say the least, difficult. And it is not justified.
The need for aggressive tuning has now evaporated. Inflation is reaching lower levels. And global inflationary pressures are subsiding. Inflation currently stands at 7.2%, below the RBNZ forecast of 7.5%. The balance of risks is tilted to the downside. We think the RBNZ should pause next week. Current circumstances warrant caution. But what we think they should do is not what they are likely to do. We expect to see a rise, but the discussion should be around 0 or 25 basis points, not 50 or 75 basis points.”
For their part, the Westpac Bank analysts said they expect the rate to rise 50 points basic, up to 4.75%, next week. Inflation has remained strong, but not as strong as the Reserve Bank of New Zealand had expected in its November review.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
